Q 18. Last year South Bend Inc. had $500 million of sales, and the sales will be forecasted $600 million this year.  Last years’ spontaneous assets were $200 million.  What is the forecasted spontaneous assets this year.  Assume that the firm is operated at full capacity and the firm is using percent of sales method for forecasting.  

I (be) at the park when you called.

Q11.   MicroDrive Inc.  December 31 Balance Sheets       (in millions of dollars)                     2024 2023 Assets             Cash       $10 $15 Short-term investments       $0 $65 Accounts receivable       $375 $315 Inventories         $615 $415 Total current assets       $1,000 $810 Net plant and equipment (Net FA)       $1,000 $870 Total assets       $2,000 $1,680               Liabilities and equity           Accounts payable       $60 $30 Notes payable       $110 $60 Accruals         $140 $130 Total current liabilities       $310 $220 Long-term bonds       $754 $580 Total liabilities       $1,064 $800 Preferred stock (400,000 shares)     $40 $40 Common stock (50,000,000 shares)     $130 $130 Retained earnings       $766 $710 Total common equity       $896 $840 Total liabilities and equity       $2,000 $1,680   MicroDrive Income Statements for Years Ending December 31     (in millions of dollars)                     2024 2023 INCOME STATEMENT           Net sales         $3,000.0 $2,850.0 Operating costs except depreciation     $2,616.2 $2,497.0 EBITDA $383.8 $353.0 Depreciation and amortization     $100.0 $90.0 Earnings before interest and taxes (EBIT)     $283.8 $263.0 Less interest       $88.0 $60.0 Earnings before taxes (EBT)     $195.8 $203.0 Taxes (t=40%)         $78.3 $81.2 Net Income before preferred dividends     $117.5 $121.8 Preferred dividends       $4.0 $4.0 Net Income available to common stockholders   $113.5 $117.8               Common dividends       $57.5 $53.0 Addition to retained earnings     $56.0 $64.8       Calculate MicroDive’s free cash flow (FCF) for Year 2014.    

Q1.  ABC’s the most recent free cash flow (FCF0) is $200 million.  The free cash flow is expected to grow at a rate of 40 percent in next year and 10 percent in the second year. After two years, it is expected to grow forever at a constant rate of 6 percent.  The cost of common stock (rs) is 10% and the weighted average cost of capital (WACC) is 8%.  What is terminal value (horizon value, HV2) at the end of year 2?

Q10.   MicroDrive Inc.  December 31 Balance Sheets       (in millions of dollars)                     2024 2023 Assets             Cash       $10 $15 Short-term investments       $0 $65 Accounts receivable       $375 $315 Inventories         $615 $415 Total current assets       $1,000 $810 Net plant and equipment (Net FA)       $1,000 $870 Total assets       $2,000 $1,680               Liabilities and equity           Accounts payable       $60 $30 Notes payable       $110 $60 Accruals         $140 $130 Total current liabilities       $310 $220 Long-term bonds       $754 $580 Total liabilities       $1,064 $800 Preferred stock (400,000 shares)     $40 $40 Common stock (50,000,000 shares)     $130 $130 Retained earnings       $766 $710 Total common equity       $896 $840 Total liabilities and equity       $2,000 $1,680   MicroDrive Income Statements for Years Ending December 31     (in millions of dollars)                     2024 2023 INCOME STATEMENT           Net sales         $3,000.0 $2,850.0 Operating costs except depreciation     $2,616.2 $2,497.0 EBITDA $383.8 $353.0 Depreciation and amortization     $100.0 $90.0 Earnings before interest and taxes (EBIT)     $283.8 $263.0 Less interest       $88.0 $60.0 Earnings before taxes (EBT)     $195.8 $203.0 Taxes (t=40%)         $78.3 $81.2 Net Income before preferred dividends     $117.5 $121.8 Preferred dividends       $4.0 $4.0 Net Income available to common stockholders   $113.5 $117.8               Common dividends       $57.5 $53.0 Addition to retained earnings     $56.0 $64.8       Calculate MicroDive’s total net operating capital (TOC), for Year 2013 and 2014. Calculate MicroDive’s net operating working capital (NOWC), total net operating capital (TOC), net operating profit after taxes (NOPAT), and free cash flow (FCF) for Year 2014.    

Their business (become) one of the largest corporations in the world: Sony.

Howard (drive) to work yesterday.

Last weekend we (have) fun.

I (eat) yesterday.

Q8. You have been given the attached information on the ABC Company.  ABC expects sales to grow by 30 percent in 2019 and operating costs should increase in proportion to sales.  Fixed assets were being operated at 90 percent of capacity in 2018, but all other assets were used to full capacity. Underutilized fixed assets cannot be sold.  Current assets and spontaneous liabilities should increase in proportion to sales during 2019.  The company plans to finance any external funds needed as 40 percent notes payable and 60 percent long-term debt.  The interest rate is 8 percent and you can assume that interest expenses will be paid at the beginning of the year.  That is, interest expenses for 2019 will be based on the amount of debt at the end of 2018.  The dividend payout ratio (50%) will remain constant.    Information on the ABC Company:                                              Year 2018       Sales                                  $1,000.00 Operating costs                     800.00                      EBIT                                  $  200.00 Interest                                    15.00                      EBT                                    $  185.00 Taxes (40%)                              74.00                      Net Income                        $  111.00 Dividends (50%)                      55.50                      Add’n to R.E.                     $     55.50                                                                   December 31, 2018       Current Assets                 $  700.00 Net fixed Assets                   300.00                      Total assets                       $1,000.00                        A/P and Accruals              $  150.00 N/P                                         100.00 Long term debt                    100.00 Common stock                     150.00 Retained earnings                500.00                      Total Liab & Equity           $1,000.00                        Calculate Additional Funding Needed (AFN).